HALF-YEAR REPORT JANUARY-JUNE 2018

Transcription

1 HALF-YEAR REPORT JANUARY-JUNE 20

2 SATISFACTORY PROFITABILITY DUE TO SUCCESSFUL RAW MATERIAL COST COMPENSATION - SIGNIFICANT PROGRESS IN STRATEGIC GROWTH INITIATIVES /20 VS /20 Net sales EUR million (EUR million), an increase of 1.9%. In constant currency growth was 6.5%. Overall stable demand at a good level across most markets Comparable EBITDA EUR 67.1 million (EUR 77.4 million), representing 11.4% (13.4%) of net sales in an environment of significant raw material cost escalation Net profit EUR 22.1 million (EUR 27.5 million) Earnings per share EUR 0.22 (EUR 0.28) Comparable EPS excluding depreciation arising from mergers EUR 0.34 (EUR 0.36) Specified guidance for comparable EBITDA: Comparable EBITDA in 20 is expected to be slightly below the previous year s level (pro forma EUR million) hence gaining momentum in the second half of the year. /20 NET SALES GROWTH IN CONSTANT CURRENCY 6.5% COMPARABLE EBITDA MARGIN 11.4% KEY HIGHLIGTHS DURING AND AFTER REPORTING PERIOD Agreement to acquire the US based specialty paper producer Expera with net sales of USD 731 million to significantly expand presence in North America, for an enterprise value of USD 615 million Fully committed financing for the transaction. Ahlstrom-Munksjö plans to conduct a rights offering of approximately EUR 150 million, which is expected to be launched during the fourth quarter of 20. Investment to reinforce market position in biodegradable and GEARING compostable tea bag, coffee and meat casing materials in the Beverage & Casing business 41.6% Investment to further grow Filtration business through capacity expansion in high-end filtration materials Agreement to acquire the Caieiras specialty paper mill in Brazil to strengthen presence in the region 1-6/20 VS 1-6/20 PROFORMA Net sales EUR 1,160.2 million (EUR 1,143.8 million), an increase of 1.4%. In constant currency growth was 6.0%. Comparable EBITDA EUR million (EUR million), representing 11.5% (13.7%) Net profit EUR 43.3 million (EUR 51.7 million) Earnings per share EUR 0.44 (EUR 0.54) Comparable EPS excluding depreciation arising from mergers EUR 0.65 (EUR 0.69) 2 HALF-YEAR REPORT JANUARY-JUNE 20

3 In this half-year report, January-June 20 and full-year 20 figures are presented on a pro forma basis to illustrate the financial impact of the merger between Ahlstrom and Munksjö as if it had been completed at the beginning of The appendix including unaudited consolidated financial statements has been prepared according to IFRS standards. KEY FIGURES EUR MILLION, OR AS INDICATED /20 /20 /20 1-6/20 1-6/20 20 Net sales , , ,232.6 Comparable EBITDA Comparable EBITDA margin, % Items affecting comparability included in EBITDA EBITDA * * 266.6* Comparable operating result excl. depreciations arising from mergers ** Comparable operating result Comparable operating result margin, % Items affecting comparability included in operating result Operating result * * 140.0* Net profit * * 88.5* Earnings per share (basic), EUR * * 0.91* Comparable EPS excl. depreciations arising from mergers ** Cash generated from operating activities Depreciation and amortization *** Capital expenditure Net debt Gearing ratio, % *Fair valuation adjustment EUR -11 million (EUR -7.6 million net of tax) on acquired Ahlstrom inventories is excluded as it is adjusted in the 2016 pro forma income statement. ** Excluding both depreciation and amortizations from mergers. *** Depreciation and amortization arising from mergers was EUR 7.7 million (EUR 8.0 million) in April-June. The actual figures for - 20 and full-year 20 are presented in the appendix only. Ahlstrom-Munksjö has adopted the European Securities and Markets Authority (ESMA) guidelines on Alternative Performance Measures (APMs) to reflect the underlying business performance and improve comparability. These measures should, however, not be considered as a substitute for measures of performance in accordance with IFRS. Alternative performance measures are derived from performance measures reported in accordance with IFRS by adding or deducting items affecting comparability (IAC), or purchase price allocation (PPA,) and they are called comparable. More details on APMs and key figures is available in the appendix. 3 HALF-YEAR REPORT JANUARY-JUNE 20

4 CEO COMMENTS In the second quarter, our performance in most of the businesses remained good. I am especially pleased that we, in the environment of significant raw material cost escalation, succeeded with our commercial strategy and implemented price increases as planned. We have focused on customer relationships that are service- and quality oriented with profitable orders of highly specialized and customized products. Thanks to our successful commercial strategy, we were able to compensate for the impacts of sharply increased raw material costs. Our gross margin for products improved compared to the previous quarter, reaching the same level as in the last year. The coated one-sided product segment, part of the Foodpack business within the Specialties business area, is clearly underperforming. While we have proceeded with the key elements of our turnaround plan for this segment, the operating environment has further deteriorated. The turnaround plan consists of primarily product and cost optimization. All in all, profitability stayed at a satisfactory level in the second quarter taking into account the raw material cost increase of about EUR 37 million. However, we are still behind the previous year s level. Nevertheless, I have strong confidence in our ability to improve the company s financial performance by continuing to focus on our commercial strategy and our growth initatives and their implementation. Performance in most of our businesses remained good and we are making significant progress towards our strategic targets. Hans Sohlström, President and CEO EXECUTING TOWARDS OUR STRATEGIC TARGETS I m also pleased that our investment projects targeting at profitable growth are proceeding well, as we have reached capacity limits in many areas. Related to these growth initiatives, we have added shifts and personnel, which has increased our costs. The machine rebuild for abrasive backings and decor papers in Arches, France, and the debottlenecking investment for filtration material capacity in Turin, Italy have been completed. The saturation line investment for filtration materials in Madisonville, the US, and the new parchmentizer line investment in Saint Severin, France are proceeding according to plan. In addition, the acquisition of Caieiras specialty paper mill is expected to be completed in the third quarter and will significantly strengthen our Latin American platform. In June, we decided to invest to further grow our Filtration business. We have already responded to the growing demand by expanding our manufacturing capabilities globally through several expansionary investments during the past few years. The new investment in Turin, Italy, will enable us to increase our capacity and allow us to strengthen our position in high-end filtration materials. In July, we decided to further leverage our competence and differentiate our offering of advanced fiber based materials by investing in biodegradable and compostable solutions for coffee, tea and casing fiber materials in the Beverage & Casings business. AGREEMENT TO ACQUIRE US SPECIALTY PAPER PRODUCER EXPERA FOR USD 615 MILLION The acquisition will almost triple Ahlstrom-Munksjö s net sales in the U.S. and provide a platform for growth. We are excited to welcome Expera and their highly talented leadership team led by Russ Wanke to Ahlstrom-Munksjö. Together, our complementary capabilities and expertise will further strengthen our position in fiber-based materials and will enable us to offer even more valuable solutions to our customers. 4 HALF-YEAR REPORT JANUARY-JUNE 20

5 OUTLOOK FOR 20 Ahlstrom-Munksjö specifies its guidance for 20 comparable EBITDA. Market outlook: Demand for Ahlstrom-Munksjö s fiber-based products is expected to remain stable at the current good level for most of the product segments and to reflect the seasonal pattern. Specified guidance for comparable EBITDA EBITDA: Comparable EBITDA in 20 is expected to be slightly below the previous year s level (pro forma EUR million) hence gaining momentum in the second half of the year. Former guidance for comparable EBITDA EBITDA: Comparable EBITDA in 20 is expected to be approximately at the previous year s level (pro forma EUR million), or slightly below. In the first-half of 20, comparable EBITDA is expected to be lower than in the comparison period and to gain momentum in the second half of the year. FINANCIAL PERFORMANCE NET SALES DEVELOPMENT NET SALES BY BUSINESS AREA, EUR MILLION /20 /20 /20 1-6/20 1-6/20 20 Decor Filtration and Performance Industrial Solutions Specialties Other and eliminations Total net sales , , ,232.6 PROFIT AND PROFITABILITY DEVELOPMENT COMPARABLE EBITDA BY BUSINESS AREA, EUR MILLION /20 /20 /20 1-6/20 1-6/20 20 Decor Filtration and Performance Industrial Solutions Specialties Other and eliminations Total comparable EBITDA COMP. EBITDA MARGIN BY BUSINESS AREA, % /20 /20 /20 1-6/20 1-6/20 20 Decor 8.7% 8.3% 6.3% 7.5% 10.0% 8.9% Filtration and Performance.3% 19.0%.2%.3%.9%.1% Industrial Solutions 13.7%.2% 14.1% 13.9%.3% 16.9% Specialties 6.8% 9.7% 8.2% 7.5% 10.8% 9.2% Other and eliminations Total comparable EBITDA margin, % 11.4% 13.4% 11.7% 11.5% 13.7% 13.0% 5 HALF-YEAR REPORT JANUARY-JUNE 20

6 APRIL-JUNE 20 Net sales amounted to EUR million, showing an increase of 1.9% from the EUR million from last year. At constant currency rates, growth was 6.5%, driven by significantly higher selling prices, particularly in the Decor and Industrial Solutions business areas. Delivery volumes increased in Filtration and Performance business area, while decreased in Decor, Insulation and Specialties business areas. CHANGE IN NET SALES /20 Volume Selling price and product mix Currency /20 EUR 577 M -2% +9% -5% EUR 588 M Comparable EBITDA was EUR 67.1 million (EUR 77.4 million), representing 11.4% of net sales (13.4%). The result was supported by a slightly improved gross margin for products as increased selling prices more than offset significantly higher variable costs. Higher raw materials costs, such as pulp and titanium dioxide, burdened the result by about EUR 37 million. Lower sales volumes and an adverse currency effect had a negative impact on the result. Targeted synergy benefits and cost reduction measures were achieved according to the plan, while on-going growth initiatives also impacted costs. Sequentially the comparable EBITDA increased to EUR 67.1 million from EUR 66.7 million in the first quarter of 20 on improved gross margin for products and higher sales volumes. MEUR 600,0 500,0 400,0 300,0 200,0 100,0 0, Net sales Q3 Q Items affecting comparability (IAC) The operating result was EUR 30.7 million (EUR 43.3 million). IACs totaled EUR -6.8 million (EUR -2.4 million) and were mainly related to integration costs of the merger of Ahlstrom and Munksjö and achieving the synergy benefits and cost saving measures. Net financial items Net financial items amounted to EUR -2.4 million (EUR -9.1 million). The figure includes net interest rate expenses of EUR 4.7 million, currency exchange rate gains of EUR 3.6 million, and other financial expenses of EUR 1.3 million. The main difference between the reported and comparison figure is related to exchange rate gains and losses. Tax, earnings per share Profit before taxes was EUR 28.4 million (EUR 34.4 million). Taxes amounted to EUR 6.3 million (EUR 6.9 million), representing an effective tax rate of 22% (20%). The tax rate was impacted by recognition of a deferred tax loss in China. The net profit for the period was EUR 22.1 million (EUR 27.5 million), and earnings per share were EUR 0.22 (EUR 0.28). Comparable earnings per share excluding depreciation arising from mergers were EUR 0.34 (EUR 0.36). MEUR 80,0 70,0 60,0 50,0 40,0 30,0 20,0 10,0 0,0 CHANGE IN NET SALES 1-6/20 Volume Selling price and product mix Currency 1-6/20 Comparable EBITDA and margin Q3 Q4 16% 14% 12% 10% 8% 6% 4% 2% 0% EUR 1,144 M -1% +7% -5% EUR 1,160 M JANUARY-JUNE 20 Net sales amounted to EUR 1,160.2 million, showing an increase of 1.4% from the EUR 1,143.8 million from last year. At constant currency rates, growth was 6.0%, driven by significantly higher selling prices, particularly in the Decor and Industrial Solutions business areas. Delivery volumes increased in the Filtration and Performance business area, while decreased in Decor, Insulation 6 HALF-YEAR REPORT JANUARY-JUNE 20

7 and Specialties business areas. Comparable EBITDA was EUR million (EUR million), representing 11.5% of net sales (13.7%). Profitability decreased mainly due to significantly higher variable costs, more than offsetting clearly higher selling prices. Higher raw materials costs, such as pulp and titanium dioxide, burdened the result by about EUR 79 million. Targeted synergy benefits and cost reduction measures were achieved according to the plan, while on-going growth initiatives had an adverse impact on costs. Items affecting comparability (IAC) The operating result was EUR 62.7 million (EUR 86.2 million). IACs totaled EUR million (EUR -6.3 million) and were mainly related to integration costs of the merger and achieving the synergy benefits. Net financial items Net financial items amounted to EUR -5.4 million (EUR -.2 million). The figure includes net interest rate expenses of EUR 9.4 million, currency exchange rate gains of EUR 6.5 million, and other financial expenses of EUR 2.5 million. The main difference between the reported and comparison figures is related to exchange rate gains and losses. Tax, earnings per share Profit before taxes was EUR 57.3 million (EUR 69.3 million). Taxes amounted to EUR 14.0 million (EUR.6 million), representing an effective tax rate of 24% (25%). The net profit for the period was EUR 43.3 million (EUR 51.7 million), and earnings per share were EUR 0.44 (EUR 0.54). Comparable earnings per share excluding depreciation arising from mergers were EUR 0.65 (EUR 0.69). FINANCING AND CASH FLOW CASH FLOW In April-June 20, net cash flow from operating activities amounted to EUR 27.5 million (EUR 41.2 million). The figure was impacted by an increase in net working capital due to higher inventories and receivables. In January-June 20, net cash flow from operating activities amounted to EUR 32.7 million (EUR 84.1 million 1 ) NET DEBT, GEARING AND LIQUIDITY The company s interest-bearing net debt amounted to EUR million at the end of the reporting period (EUR million on December 31, 20, EUR million on June 30, 20). At the end of the reporting period, the weighted average interest rate was 2.3%. Gearing stood at 41.6%. Ahlstrom-Munksjö s liquidity continues to be good. At the end of the review period, the total cash position was EUR 7.1 million. In addition, the company had undrawn committed credit facilities and committed cash pool overdrafts of EUR million available. EQUITY On June 30, 20, equity was EUR 1,041.1 million and total assets were EUR 2,384.0 million. The equity was negatively impacted by a translation effect of EUR.4 million due to adverse currency fluctuations in January-June 20. The equity impact of the declared EUR 50 million, or EUR 0.52 per share, dividend was booked in the first quarter of 20, while the cash flow effect is booked in the second and third quarters of The actual cash flow figure for the corresponding comparison period is presented in the appendix only. 7 HALF-YEAR REPORT JANUARY-JUNE 20

8 SYNERGY BENEFITS AND COST REDUCTION MEASURES The merger creating Ahlstrom-Munksjö Oyj was completed on April 1, 20. The combination created a global leader in innovative and sustainable fiber-based materials. Ahlstrom-Munksjö has completed all of the original integration initiatives. The successful combination of businesses has created a solid basis for improved performance and the company has continued efforts to improve its operational efficiency. Ahlstrom-Munksjö targets synergies and cost reduction initiatives with a profit improvement impact of EUR 50 million annually in its existing businesses by the end of the first quarter of Cost synergies comprise mainly lower fixed costs as well as lower variable costs through coordination of sourcing activities and optimization of production. The plan also includes business synergies from incremental sales and product mix improvement, predominately relating to the integration of the former Graphics and Packaging business area into the new Specialties business area, and developing a combined product and service offering. Cost reduction measures include adjusting Group structure to Ahlstrom-Munksjö s operating model, where business units have clear responsibility and local accountability. The operating model enables operational flexibility and lean group functions. This also included the concentration and relocation of the company s head office to Helsinki from Stockholm. At the end of the reporting period, the annual synergy achievement run rate was approximately EUR 32 million. The financial result for the second quarter of 20 included realized synergies of approximately EUR 6.2 million. Costs related to the achievement of synergies and cost reduction measures are estimated to be EUR million by the end of the first quarter of Achieved synergy benefits and related costs, EUR million / Q3/ Q4/ / / Achieved annualized synergy benefits Quarterly costs Cumulative costs CAPITAL EXPENDITURE Ahlstrom-Munksjö's capital expenditure excluding acquisitions totaled EUR 57.1 million in January-June 20 (EUR 31.8 million) and EUR 31.4 million in April-June 20 (EUR 15.4 million). The investments were related to maintenance, cost and efficiency improvements, as well as growth initiatives. The cash flow effect of current capital expenditure on fixed assets as well as strategic investments is expected to be approximately EUR 150 million in 20 (EUR 89.7 million in 20). The company had previously estimated capital expenditure to be about EUR 120 million in 20. INVESTMENT DECISIONS TO IMPROVE FINANCIAL AND ENVIRONMENTAL PERFORMANCE On April 10, 20, Ahlstrom-Munkjsö announced investments of about EUR 27 million in improved financial and environmental performance. The investments include rebuilding a recovery boiler at the Billingsfors plant and modernizing of a bailing line at the Aspa pulp mill, both located in Sweden and part of the Industrial Solutions business area. On April 23, 20, the company announced investments of about EUR 9 million. In the Decor business area, the company will invest to further enhance the quality of pre-impregnated decor papers produced at its Dettingen plant in Germany. In the Specialties business area, the company will rebuild a converting line of sterilization wrap being produced at its Pont Audemer plant in France. On June, 20, Ahlstrom-Munksjö announced an investment of about EUR 28 million to expand manufacturing capacity as well as product capabilities of industrial filtration applications in Turin, Italy as well as in Ställdalen, Sweden and Malmedy, Belgium. The project will start in 20 and is expected to be completed during the first half of HALF-YEAR REPORT JANUARY-JUNE 20

9 On July, 20, the company announced an investment of about EUR 28 million to reinforce its market position in biodegradable and compostable tea bag, coffee and meat casing materials in the Beverage & Casing business. The project includes purchasing a secondhand paper making line to be dismantled and transferred to the Chirnside manufacturing site in the UK. The machine is expected to be fully commissioned in the beginning of the fourth quarter of PERSONNEL Ahlstrom-Munksjö employed an average of 5,897 people in January-June 20 (5,914) as full-time equivalents. As of June 30, 20, the highest numbers of employees were in France (28%), Sweden (14%), the United States (12%), Germany (9%), and Italy (9%). SUSTAINABILITY Ahlstrom-Munksjö published its first sustainability report as a combined company in February 20. The report defines our nine material topics and sets targets and metrics for each of them. While we have established quantitative performance baselines from 20 where possible for our material topic targets, we do not have relevant historical data to compare our current to past sustainability performance due to the merger. We look forward to sharing this information in future reports. On June 14, 20, Ahlstrom-Munksjö had its Gold rating level renewed for the company s sustainability management and performance for the second consecutive year from EcoVadis. The Gold rating is a result of performance improvements in all four Corporate Social Responsibility dimensions assessed by EcoVadis; environment, labor practices, fair business practices, and sustainable procurement. It places the company among the top 1% of all suppliers evaluated by the platform, regardless of their industry. HEALTH AND SAFETY Health and safety of employees is a top priority at Ahlstrom-Munksjö. The company has chosen three priority metrics to track performance in this field: total recordable incidents (TRI 2 ) rate, near miss rate, and hours of tailored safety training per employee per year. Ahlstrom-Munksjö believes that a goal of zero accidents is achievable, and our long-term target for TRI is zero. In 20, our near miss rate target is 2.9 and we aim to provide 15 hours of tailored safety training per employee. In January-June 20, the TRI rate was 1.6, the near miss rate was 3.9 and 15.6 hours of training was provided to employees. MAJOR EVENTS DURING THE REPORTING PERIOD HANS SOHLSTRÖM STARTED AS NEW PRESIDENT AND CEO Hans Sohlström started as President and CEO on April 16, 20. He replaced Jan Åström, who retired. AGREEMENT TO ACQUIRE CAIEIRAS SPECIALTY PAPER MILL On April 24, 20, Ahlstrom-Munksjö entered into an agreement to acquire MD Papeis Caieiras specialty paper mill in Brazil of the Formitex Group, an industrial conglomerate active in paper, chemical and panel board industries. 2 TRI: sum of all recorded occupational accidents; lost time accidents, occupational diseases, light duty cases, and other recordable incident. Total recordable Incidents Rate (TRIR); (TRI/Total hours worked) x 200, HALF-YEAR REPORT JANUARY-JUNE 20

10 The transaction is expected to be completed during the third quarter of 20 and is subject to the customary completion terms, including merger clearance from the relevant competition authorities. The annual net sales of the Caieiras business to be acquired are approximately EUR 80 million and comparable EBITDA approximately EUR 13 million in 20. The debt free purchase price is approximately EUR 100 million. Annual synergy benefits are estimated to be up to EUR 6 million. Ahlstrom-Munksjö s presence in Brazil grows further through the acquisition, operating three mills, all near Sao Paolo, and employing over 700 persons and revenues of approximately of EUR 200 million. CHANGES IN THE EXECUTIVE MANAGEMENT TEAM Pia Aaltonen-Forsell, Executive Vice President and CFO, a member of Ahlstrom-Munksjö Executive Management Team, assumed the responsibility for Communications and Investor Relations in addition to her CFO role as of April 24, 20. Dan Adrianzon, who is currently leading the integration project following the merger between Ahlstrom and Munksjö, has been appointed Executive Vice President, People and Safety and a member of the Executive Management Team as of April 24, 20. In addition, he continues to lead the integration project. Dan Adrianzon has held several senior management positions in general management and in finance and control in Ahlstrom-Munksjö and prior to that in Munksjö since Between 1985 and 1997 he held various positions within the French Group Saint Gobain, both in Sweden and in France. Åsa Jackson, Executive Vice President, Human Resources and Health & Safety and Anna Selberg, Executive Vice President, Communications and Investor Relations agreed to leave the company. MAJOR EVENTS AFTER THE REPORTING PERIOD AHLSTROM-MUNKSJÖ TO ACQUIRE US SPECIALTY PAPER PRODUCER EXPERA On July 23, 20 Ahlstrom-Munksjö signed an agreement with Specialty Papers Holding, L.P. to acquire Expera Specialty Solutions, a U.S. based specialty paper producer, to expand its presence in North America and further strengthen its offering of advanced custom-made fiber based materials. The acquisition will almost triple Ahlstrom-Munksjö s net sales in the U.S. and provide a platform for growth. Together Ahlstrom- Munksjö and Expera, combined with the Caieiras acquisition announced in April, generated illustrative combined annual net sales of EUR 2,921 million in 20. Ahlstrom-Munksjö has secured fully committed financing for the transaction.to finance part of the transaction, Ahlstrom-Munksjö plans to conduct a rights offering of approximately EUR 150 million, which is expected to be launched during the fourth quarter of 20. The Company will separately convene an extraordinary general meeting of shareholders (EGM) to authorize the Board of Directors to resolve on the share issue. Shareholders holding in aggregate approximately 35.9% (June 30, 20) of the shares and votes in the Company, AC Invest Five B.V., a company belonging to Ahlström Capital group, Viknum AB, Belgrano Inversiones Oy, Ilmarinen Mutual Pension Insurance Company, Varma Mutual Pension Insurance Company and Baltiska Handels A.B. have irrevocably undertaken to attend the EGM and vote in favor of the share issue authorization. AC Invest Five B.V., a company belonging to Ahlström Capital group, Viknum AB, Belgrano Inversiones Oy and Baltiska Handels A.B. have further expressed their support and intention to subscribe for their respective pro rata allocation in the rights offering. The remainder of the rights offering will be underwritten by Nordea and SEB, subject to customary terms and conditions. The full release is available at INVESTMENT TO REINFORCE MARKET POSITION IN BEVERAGE & CASING BUSINESS On July, 20, the company announced an investment of about EUR 28 million to reinforce its market position in biodegradable and compostable tea bag, coffee and meat casing materials in the Beverage & Casing business. The project includes purchasing a secondhand paper making line to be dismantled and transferred to the Chirnside manufacturing site in the UK. The machine is expected to be fully commissioned at the beginning of the fourth quarter of HALF-YEAR REPORT JANUARY-JUNE 20

11 BUSINESS AREA REVIEWS DECOR The Decor business is a manufacturer of paper-based surfacing for wood-based materials such as laminate flooring, furniture and interiors. Decor develops versatile and high-tech solid color, print base and pre-impregnated papers for production of low- and highpressure laminates and finish foil applications. Market review April-June 20: Demand for decor products remained at a good level across all segments. Competition has intensified particularly in markets outside of Europe due to new suppliers. Result development in April-June 20: Net sales rose by 3.7% to EUR million, compared with EUR 98.2 million in April-June 20. The increase was driven by higher selling prices as well as an improved product mix. Sales volumes were lower than in the comparison period. Comparable EBITDA rose to EUR 8.9 million (EUR 8.1 million), representing 8.7% (8.3%) of net sales. The increase was driven by higher gross margin for products as the continued increase in titanium dioxide and pulp costs was offset by higher selling prices, as well as lower fixed costs. Lower sales volumes had a negative impact on the result. Result development in January-June 20: Net sales rose by 4.1% to EUR million, compared with EUR million in January-June 20. The increase was driven by higher selling prices as well as an improved product mix. Sales volumes were lower than in the comparison period. Comparable EBITDA fell to EUR 15.2 million (EUR 19.4 million), representing 7.5% (10.0%) of net sales. Higher selling prices had a positive impact on the result, and almost compensated for the steep increase in titanium dioxide and pulp costs. Lower sales volumes had a negative impact on the result. MEUR 120,0 100,0 80,0 60,0 40,0 20,0 0,0 MEUR 20,0 15,0 10,0 5,0 0, Net sales 90.5 Q Q Comparable EBITDA and margin Q3 Q4 Decor 16% 12% 8% 4% 0% EUR MILLION /20 /20 Q4/20 Q3/20 /20 20 Net sales Comparable EBITDA Comparable EBITDA margin, % 8.7% 6.3% 9.2% 6.4% 8.3% 8.9% Capital expenditure n/a Depreciation and amortization n/a 11 HALF-YEAR REPORT JANUARY-JUNE 20

12 FILTRATION AND PERFORMANCE The Filtration and Performance business area develops and produces filtration materials for engine oils, fuels and air as well as industrial filtration. It also produces glassfiber for flooring products and wind turbine blades and makes nonwoven materials for automotive, construction, textile and hygiene applications and wallcover materials. MEUR 200,0 160,0 120,0 Net sales Market review April-June 20: Demand for filtration products was solid across many regions and end-use segments, and particularly in heavy-duty vehicles and industrial air. In construction-related markets, demand for flooring and plasterboard materials was good whereas the wallcover market slowed in Europe. 80,0 40,0 0,0 Q3 Q4 Result development in April-June 20: Net sales rose by 0.2% to EUR 4.7 million, compared with EUR 4.3 million in April-June 20 as higher sales volumes and selling prices in local currency were offset by an adverse currency impact. Sales volumes of filtration and nonwoven products rose slightly whereas growth in glass fiber tissue used in flooring applications was stronger. Comparable EBITDA declined to EUR 30.2 million (EUR 33.1 million), representing.3% (19.0%) of net sales. The gross margin for products was at the same level as a year ago as higher selling prices and an improved product mix were offset by increased raw material costs. Higher volumes did not fully compensate for the increased fixed costs, partly related to the expansion of the Filtration business. MEUR 35,0 30,0 25,0 20,0 15,0 10,0 5,0 0,0 Comparable EBITDA and margin Q3 Q4 25% 20% 15% 10% 5% 0% % Result development in January-June 20: Net sales fell by 0.5% to EUR million, compared with EUR million in January-June 20 as higher sales volumes and selling prices in local currency, particularly in Filtration, were offset by an adverse currency impact. Comparable EBITDA declined to EUR 59.0 million (EUR 64.9 million), representing.3% (.9%) of net sales. The decline was due to a slight erosion in gross margin for products as higher selling prices were more than offset by increased variable and fixed costs. Higher volumes did not fully compensate for the increased fixed costs, partly related to the expansion of the Filtration business. Filtration Nonwovens Building & Wind EUR MILLION /20 /20 Q4/20 Q3/20 /20 20 Net sales Comparable EBITDA Comparable EBITDA margin, %.3%.2% 15.4% 19.2% 19.0%.1% Capital expenditure n/a Depreciation and amortization n/a 12 HALF-YEAR REPORT JANUARY-JUNE 20

13 INDUSTRIAL SOLUTIONS The Industrial Solutions business area produces a wide range of products and materials often used in manufacturing or production processes. These include products such as abrasive backings, electrotechnical insulation papers, release liners, thin papers, specialty pulp and balancing foil paper. The business area also houses Arches fine art and printing papers, which carry with them centuries of tradition. MEUR 200,0 160,0 120, Net sales Market review April-June 20: Demand was stable in most segments; release liners, electrotechnical insulation papers, abrasive backings, and specialty pulp. The domestic market for coated specialties products in Brazil remained stable as well. 80,0 40,0 0,0 Q3 Q4 Result development in April-June 20 Net sales rose by 3.9% to EUR million, compared with EUR million in April-June 20. Growth was driven by higher selling prices and an improved product mix across the business area. This positive development was partially offset by lower sales volumes, particularly in the Insulation business unit where deliveries of specialty pulp declined due to a temporary production issue. Comparable EBITDA fell to EUR 23.1 million (EUR 27.9 million), representing 13.7% (.2%) of net sales. Higher selling prices and an improved product mix compensated for the increased variable costs. Lower sales volumes had a negative impact on the result. MEUR 30,0 25,0 20,0 15,0 10,0 5,0 0,0 Comparable EBITDA and margin Q3 Q4 20% 15% 10% 5% 0% Result development in January-June 20 Net sales rose by 2.9% to EUR million, compared with EUR million in January-June 20. Growth was driven by higher selling prices and an improved product mix across the business area. This positive development was partially offset by lower sales volumes. Comparable EBITDA fell to EUR 46.7 million (EUR 56.3 million), representing 13.9% (.3%) of net sales. Higher selling prices and an improved product mix compensated for the increased raw material and energy costs. Lower sales volumes had a negative impact on the result. Coated Specialties Abrasive Insulation Release Liners EUR MILLION /20 /20 Q4/20 Q3/20 /20 20 Net sales Comparable EBITDA Comparable EBITDA margin, % 13.7% 14.1% 16.0%.2%.2% 16.9% Capital expenditure n/a Depreciation and amortization n/a 13 HALF-YEAR REPORT JANUARY-JUNE 20

14 SPECIALTIES The Specialties business area produces materials for food and beverage packaging, laboratory filters and life science diagnostics, water filtration, tape products and medical fabrics. It also supplies hot cooking oiland milk filtration materials, graphics paper for sticky notes and envelopes and metallized labels. Market review April-June 20: Demand for food packaging-related parchment products was strong, while the market for uncoated and coated papers as well as tea bag materials remained highly competitive. Demand for life science and medical products as well as tape materials was good. Result development in April-June 20: Net sales amounted to EUR million and were unchanged from April-June 20 as higher selling prices were offset by lower sales volumes. Sales of medical, laboratory and life science, as well as tape products rose, whereas food and beverage packaging materials declined. An adverse currency effect had a negative impact on net sales. Comparable EBITDA was EUR 10.2 million (EUR 14.7 million), representing 6.8% (9.7%) of net sales. The result was burdened by lower volumes and increased variable costs in the coated-one sided business. Performance in other businesses was stable. Result development in January-June 20: Net sales amounted to EUR million and were unchanged from January-June 20 as higher selling prices were offset by lower sales volumes. An adverse currency effect had a negative impact on net sales. Comparable EBITDA was EUR 22.2 million (EUR 32.2 million), representing 7.5% (10.8%) of net sales. The result was mainly burdened by lower volumes and increased variable costs in the coated-one sided business. Performance in other businesses was stable. MEUR 160,0 140,0 120,0 100,0 80,0 60,0 40,0 20,0 0,0 MEUR 20,0 15,0 10,0 5,0 0,0 Advanced Liquid Technologies Beverage and Casings Food packaging Net sales Q3 Q Comparable EBITDA and margin Q3 Medical Q4 Tape 14% 12% 10% 8% 6% 4% 2% 0% EUR MILLION /20 /20 Q4/20 Q3/20 /20 20 Net sales Comparable EBITDA Comparable EBITDA margin, % 6.8% 8.2% 7.3% 7.5% 9.7% 9.2% Capital expenditure n/a Depreciation and amortization n/a 14 HALF-YEAR REPORT JANUARY-JUNE 20

15 SHARES AND SHARE CAPITAL Ahlstrom-Munksjö s shares are listed on the Nasdaq Helsinki as well as on the Nasdaq Stockholm. All shares carry one vote and have equal voting rights. The trading code is AM1 in Helsinki and AM1S in Stockholm. On June 30, 20, Ahlstrom-Munksjö s share capital amounted to EUR 85 million, and the total number of shares since April 1, 20 has been 96,438,573. The company had 11,787 shareholders at the end of the reporting period (11,526 as of Dec. 31, 20), according to Euroclear Finland Ltd. Ahlstrom-Munksjö held a total of 364,862 of its own shares, corresponding to approximately 0.4% of the total shares and votes. SHARE PRICE PERFORMANCE AND TRADING Nasdaq Helsinki Nasdaq Stockholm 1-6/20 1-6/20* 1-6/20 1-6/20* Share price at the end of the period, EUR/SEK Highest share price, EUR/SEK Lowest share price, EUR/SEK Market capitalization at the end of the period**, EUR million 1, ,710.1 N/A N/A Trading value, EUR/SEK million Trading volume, shares million Average daily trading volume, shares 38,356 47,202 4,800 6,693 * January-March 20 Munksjö Oyj only **Excluding the shares held by Ahlstrom-Munksjö Ahlstrom-Munksjö s shares are also traded on alternative exchanges, such as Cboe, Posit and Turquoise. Those exchanges represented about 36% of the total trading value during the reporting period (source: Fidessa Fragmentation Index). ANNUAL GENERAL MEETING Ahlstrom-Munksjö Oyj's Annual General Meeting was held on March 21, 20. The Annual General Meeting adopted the Financial Statements for 20 and discharged the members of the Board of Directors and the President and CEO from liability for the financial year 20. The AGM resolved to distribute a dividend of EUR 0.52 per share for the fiscal year that ended on December 31, 20 in accordance with the proposal of the Board of Directors. The dividend will be paid in two instalments. The first instalment of EUR 0.26 per share was paid on April 3, 20. The second instalment of EUR 0.26 per share shall be paid in September 20 to a shareholder who on the record date of the payment is registered in the shareholders register of the company maintained by Euroclear Finland Ltd or in the register of shareholders maintained by Euroclear Sweden AB, which, together with the payment date, shall be resolved by the Board of Directors in its meeting scheduled for September 10, 20. The record date of the payment would be September 12, 20 and the payment date September 19, 20, at the latest. The AGM resolved that the number of Board members to be eight. Peter Seligson, Elisabet Salander Björklund, Alexander Ehrnrooth, Johannes Gullichsen, Hannele Jakosuo-Jansson, Harri-Pekka Kaukonen and Pernilla Walfridsson were re-elected. Valerie A. Mars was elected as new member of the Board. The Board members were elected for the period ending at the close of the next AGM. The AGM resolved in accordance with the proposal of the Board to re-elect KPMG Oy Ab as the company s auditor. KPMG Oy Ab has designated Authorised Public Accountant Anders Lundin as the Responsible Auditor. 15 HALF-YEAR REPORT JANUARY-JUNE 20

16 AUTHORIZATION TO REPURHCASE OWN SHARES The AGM authorized the Board of Directors to resolve to repurchase and to distribute the company s own shares as well as to accept them as pledge in one or more instalments. The number of shares to be repurchased or accepted as pledge by virtue of the authorization shall not exceed 8,000,000 own shares in the company, subject to the provisions of the Finnish Companies Act on the maximum amount of shares owned by or pledged to the company or its subsidiaries. The shares may be repurchased or accepted as pledge in one or several instalments and in another proportion than that of the existing shareholdings of the shareholders in the company. The shares shall be repurchased in public trading at the prevailing market price by using unrestricted shareholders equity. The authorizations are valid until the close of the next Annual General Meeting, however, no longer than eighteen () months from the close of the Annual General Meeting. DECISIONS TAKEN BY THE BOARD OF DIRECTORS AFTER THE AGM The organization meeting of the Board of Directors, which was held immediately after the Annual General Meeting, elected Peter Seligson as Chairman and Elisabet Salander Björklund as Vice Chairman of the Board. The Board of Directors appointed two permanent committees; the Audit Committee and the Human Resources Committee. The members of the Audit Committee are Elisabet Salander Björklund (Chair), Alexander Ehrnrooth, Harri-Pekka Kaukonen, Valerie A. Mars and Pernilla Walfridsson. The members of Human Resources Committee are Hannele Jakosuo-Jansson (Chair), Johannes Gullichsen and Peter Seligson. SHAREHOLDERS NOMINATION BOARD Ahlstrom-Munksjö's three largest registered shareholders based on holdings on May 31, 20 nominated the following persons as their representatives in the Shareholders' Nomination Board of Ahlstrom-Munksjö: Mikael Lilius (Ahlström Capital Oy) Alexander Ehrnrooth (Viknum AB and Belgrano Inversiones Oy) Mikko Mursula (Ilmarinen Mutual Pension Insurance Company) The company's Chairman of the Board, Peter Seligson, and Elisabet Salander Björklund, as nominated by the Board, are also expert members of the Nomination Board. The Nomination Board elected Mikael Lilius from among its members as Chairman. The Nomination Board prepares proposals to the Annual General Meeting for the election and remuneration of the members of the Board of Directors and the remuneration of the members of the Board committees and the Nomination Board. SCHEDULED MAINTENANCE SHUTDOWNS IN 20 The annual maintenance and seasonal shutdowns, mainly in the third and fourth quarters, are expected to be carried out to about the same extent as in 20. The annual maintenance shut-down at the pulp production facility in Aspa in Sweden is planned to be carried out in the fourth quarter in 20 and it will have an impact of approximately EUR 4 million on comparable EBITDA. 16 HALF-YEAR REPORT JANUARY-JUNE 20

17 SHORT-TERM RISKS Ahlstrom-Munksjö is exposed to changing market conditions and uncertainty caused by both macroeconomic and industry related events and is exposed to risks that may arise from its operations, changes in the business environment, developments in the global economy or potential changes in the legislative framework. The materialization of such risks could have a material adverse effect on the company s operations, earnings and financial position. The company s significant risks and uncertainty factors mainly consist of developments in demand for and prices of sold products, the cost and availability of significant raw materials, financial risks, as well as other business factors including developments in the financial markets. The cost of key raw materials such as pulp and titanium dioxide has continued to increase and the company s financial performance may be impacted by its ability to raise selling prices and the timing of such rises to mitigate cost inflation. Ahlstrom-Munksjö s key financial risks include interest rate and currency risks, liquidity risk and credit risk. The Group has exposure to tax risks due to potential changes in tax laws or regulations or their application, or as a result of on-going or future tax audits or claims. The company has operations in many countries, and sometimes disputes cannot be avoided in daily operations. The company is sometimes involved in legal actions, disputes, claims for damages and other procedures. The result of these cannot be predicted, but taking into account all available information to date, the impact is not expected to have a significant impact on the financial position of the company. More information about risks and uncertainty factors related to Ahlstrom-Munksjö s business and the company s risk management is available at The actual numbers in this report have been prepared in accordance with International Financial Reporting Standards (IFRS). Comparable figures refer to the same period in the previous year, unless otherwise stated. The report contains certain forward-looking statements that reflect the present views of the company's management. The statements contain uncertainties and risks and are thus subject to changes in the general economic situation and in the company's business. Ahlstrom-Munksjö Oyj Board of Directors ADDITIONAL INFORMATION Hans Sohlström, President and CEO, tel Pia Aaltonen-Forsell, CFO, tel Johan Lindh, Head of Investor Relations, + 46 (0) Juho Erkheikki, Investor Relations Manager, tel (0) WEBCAST AND CONFERENCE CALL A combined news conference, call and live webcast will be arranged on the publishing day, July 26, 20, at 1:00 p.m. EEST (12:00 noon CEST) at Ahlstrom-Munksjö s head office in Helsinki (Alvar Aallon katu 3 C, meeting room Antti). The report will be presented in English by President and CEO Hans Sohlström and CFO Pia Aaltonen-Forsell. WEBCAST AND CONFERENCE CALL INFORMATION The combined webcast and teleconference can be viewed at: HALF-YEAR REPORT JANUARY-JUNE 20

18 Finland: +358 (0) Sweden: +46 (0) UK: +44 (0) Conference ID: To join the conference call, participants are requested to dial one of the numbers above 5-10 minutes prior to the start of the event. An on-demand version of the conference call will be available on Ahlstrom- Munksjö s website later the same day. By dialing in to the conference call, the participant agrees that personal information such as name and company name will be collected. The conference call will be recorded. FINANCIAL REPORTS IN 20 Interim report January-September 20 October 30, 20 Ahlstrom-Munksjö plans to organize a capital markets day in Helsinki on September 7, 20. AHLSTROM-MUNKSJÖ IN BRIEF Ahlstrom-Munksjö is a global leader in fiber-based materials, supplying innovative and sustainable solutions to customers worldwide. Our offerings include decor paper, filter media, release liners, abrasive backings, nonwovens, electrotechnical paper, glass fiber materials, food packaging and labeling, tape, medical fiber materials and solutions for diagnostics. Combined annual net sales are about EUR 2.2 billion and we employ 6,000 people. The Ahlstrom-Munksjö share is listed on the Nasdaq Helsinki and Stockholm. Read more at HALF-YEAR REPORT JANUARY-JUNE 20

19 APPENDIX: CONSOLIDATED FINANCIAL STATEMENTS Financial statements are unaudited. INCOME STATEMENT EUR million /20 /20 1-6/20 1-6/20 20 Net sales , ,959.9 Other operating income Total operating income , ,972.6 Operating costs Changes in inventories of finished goods and work in progress Materials and supplies Other operating expenses Personnel costs Depreciation and amortization Total operating costs , ,868.9 Share of profit in equity accounted investments Operating result Net financial items Profit before tax Taxes Net profit pro forma INCOME STATEMENT EUR million /20 1-6/20 20 Net sales , ,232.6 Other operating income Total operating income , ,246.4 Operating costs Changes in inventories of finished goods and work in progress Materials and supplies ,040.1 Other operating expenses Personnel costs Depreciation and amortization Total operating costs , ,106.2 Share of profit in equity accounted investments Operating result 43.3* 86.2* 140.0* Net financial items Profit before tax Taxes Net profit 27.5* 51.7* 88.5* *Fair valuation adjustment EUR 11 million (EUR 7.6 million net of tax) on acquired Ahlstrom inventories is excluded as it is adjusted in the 2016 pro forma income statement. 19 HALF-YEAR REPORT JANUARY-JUNE 20

20 OTHER COMPREHENSIVE INCOME EUR million /20 /20 1-6/20 1-6/20 20 Net profit Other comprehensive income Items that may be reclassified to profit or loss Exchange differences on translation of foreign operations for the period -2, Hedges of net investments in foreign operations Change in cash flow hedge reserve Cash flow hedge transferred to this year's result Items that will not be reclassified to profit or loss Actuarial gains and losses on defined benefit plans Tax attributable to other comprehensive income Comprehensive income Net profit attributable to Parent company s shareholders Non-controlling interests Comprehensive income attributable to Parent company s shareholders Non-controlling interests Earnings per share Weighted average number of outstanding shares 96,073,711 96,536,031 96,073,711 73,775,255 84,941,326 Basic earnings per share, EUR Diluted earnings per share, EUR pro forma EARNINGS PER SHARE /20 1-6/20 20 Weighted average number of outstanding shares 96,236,031 96,236,031 96,130,3 Basic earnings per share, EUR HALF-YEAR REPORT JANUARY-JUNE 20